PHILADELPHIA – A breach of contract lawsuit between a Pennsylvania safety equipment distributor and a Michigan shoring products manufacturer is heading to federal court in Michigan.

“Given the existence of a pending related action in the Western District of Michigan, transfer is warranted in this case. Transfer will ensure that the dispute is resolved efficiently, avoid duplicative litigation and advance judicial comity,” Judge Berle M. Schiller of the U.S. District Court for the Eastern District of Pennsylvania said in a ruling issued Wednesday.

Trenchtech is a Pennsylvania corporation that sells safety equipment to contractors for excavation projects, which include shoring products that prevent tunnels from caving in – while Efficiency Production, Inc. (EPI) is a Michigan corporation that manufactures those shoring products.

Through an oral agreement reached in 2000 or 2001, Trenchtech became the exclusive distributor of EPI products in certain areas. Under this agreement, EPI agreed not to sell or rent its products to other distributors or contractors in the region, and Trenchtech agreed not to buy shoring products from other manufacturers.

Since 1998, Trenchtech has purchased approximately $20 million in products from EPI.

In March 2010, three employees of Trenchtech resigned and founded a competing company called ShorQuip Supply, Inc. (ShorQuip), which began selling EPI’s shoring products in the same regional markets as Trenchtech – leading to EPI filing suit in October, in the U.S. District Court for the Western District of Michigan against Trenchtech, for $822,563.16 in unpaid goods and services.

In December, Trenchtech countered with a $5 million suit against EPI in the U.S. District Court for the Eastern District of Pennsylvania, for breaching the oral agreement and selling its products to ShorQuip.

Schiller’s question became whether the cases had enough common ground to invoke the “first-filed rule”, or giving preference to the initial district where the first of two similar suits were filed.

Trenchtech argues the two suits are unrelated because “they revolve around two separate agreements: the Michigan action is a straightforward and self-contained collections action concerning a contract for the sale of goods, while the Pennsylvania action revolves around an oral exclusivity agreement.”

EPI countered that the contract for the sale of goods and the exclusivity agreement are “inextricably unrelated, since both revolve around EPI’s agreement to sell its shoring products to Trenchtech, and Trenchtech’s agreement to pay for these products.”

Though Schiller agreed with EPI the “existence and terms of the oral exclusivity agreement at issue in the Pennsylvania action bear on the debts and obligations at issue in the Michigan action”, it was possible both courts would be called upon to examine that existence and related terms.

“Finding substantial overlap between the two actions, this Court will invoke the first-filed rule for the sake of judicial economy and comity among federal courts,” Schiller said.

Further, after Schiller weighed the Jumara factors associated with the cases (the public and private factors considered when transfer of a lawsuit may be warranted), Schiller opted to approve transfer of the case to federal court in Michigan.

“Here, Trenchtech’s choice of forum and the convenience of certain witnesses appear to weigh slightly against transfer, while EPI’s choice of forum weighs slightly in favor of transfer. The other factors are largely neutral,” Schiller said. “Courts in this District have held that when there is a ‘strong likelihood of consolidation with a related action,’ transfer of venue is warranted.”

Schiller concluded his analysis by transferring the instant suit to Michigan.

“For the reasons stated above, the Court concludes that this action should be transferred to the Western District of Michigan, and will grant EPI’s motion to transfer. Because the case will be transferred, this Court will deny the motion to dismiss as moot,” Schiller said.